NEW YORK – The nation's manufacturing sector expanded in July at a faster clip than in June, while companies paid significantly more for raw materials, a trade group said Tuesday.
The Institute for Supply Management, based in Tempe, Ariz., said its manufacturing index registered 54.7 in July, above the 53.8 June reading and stronger than analysts' estimates of 53.5 to 53.8.
A reading of 50 or more indicates expansion, while below 50 indicates contraction. The July figure represented the 38th consecutive month of growth.
The prices paid index jumped 2 percentage points to 78.5 in July from 76.5 in the previous month, signaling that rising prices for everything from fuel to paper could begin to eat into manufacturers' profits.
The results came on the back of a report from the Commerce Department that showed weakening consumer spending and quickening inflation.
Many economists believe U.S. economic growth has started to flag as higher interest rates have crimped demand for housing, while surging fuel prices are hurting consumer spending.
The ISM report is one of many that the Federal Reserve will examine to decide whether to raise short-term interest rates on Aug. 8. Analysts are split on whether the Fed, which in June raised rates for the 17th consecutive time, will hike them again or take a pause. The funds rate, or the interest banks charge each other on overnight loans, is currently 5.25 percent.
Share prices fell in midmorning trading on Wall Street due to worries about rising inflation and the likelihood of another interest rate hike. In morning trading, the Dow Jones industrial average fell 75.48, or 0.67 percent, to 11,110.20. The Standard & Poor's 500 index lost 10.43, or 0.82 percent, to 1,266.23, and the Nasdaq composite index dropped 30.65, or 1.47 percent, to 2,060.82.
The ISM's new orders index fell, registering 56.1 in July, down from 57.9 in June, while the backlog of orders dropped to 50.5 in July from 54.0 the month before.
The 12 industries that reported growth in July were: primary metals; food, beverage and tobacco products; electrical equipment, appliances and components; chemical products; furniture and related products; miscellaneous manufacturing; petroleum and coal products; computer and electronic products; paper products; plastics and rubber products; nonmetallic mineral products; and machinery.